Boosting Profits by Evolving Procurement From Transactional to Strategic
Procurement is often viewed as a necessary but non-strategic part of running a business – you need to purchase goods and services, you try to find them as cheaply as possible, and then you purchase and pay your vendors. Pretty straight forward. But for companies that spend hundreds of thousands and millions of dollars per year purchasing the business essentials, procurement can be both a huge expense and a key area in which to identify savings.
To help wrangle the procurement process under control and manage it more systematically, many companies have purchased Oracle Procurement applications. Oftentimes, however, companies have only implemented and used these applications at the most basic level – or not at all – and aren’t realizing the full savings possible.
By maximizing the potential of your Oracle Procurement applications to understand what you’re spending and where, and then managing your purchasing accordingly, you can realize an average yearly savings of 18% or more. This includes savings of as much as:
- 6% from better management of risk in your supplier base and reducing supplier management costs
- 4% by identifying common products and services to leverage volume buys
- 8% by implementing enterprise governance for everything you buy
There are four primary areas in which companies can take a more systematic and strategic approach to derive these savings, as well as greater efficiency and improved accountability: spend visibility, sourcing, contract management and supplier management.
Finding ways to save in the procurement process starts with gaining visibility into your enterprise-wide spending: what am I buying, when did I buy, whom am I buying from, how much am I spending? Disparate sources of data are often the biggest challenge faced by procurement organizations. Spend visibility not only consolidates data from multiple sources but also provides insights into low-hanging savings opportunities.
Once you’ve gained visibility into your spending by identifying what you’re buying and from which vendors, you can start to make strategic sourcing decisions. Information gives you the power to analyze and negotiate with vendors, putting you in control of the sourcing process. By inviting select vendors to bid on line items, you can often reduce your prices by 50-60% right off the bat.
Inconsistent buying practices lead to lost savings opportunities. Implementing a contract management platform and process allows you to proactively manage every contract up to 70% faster and ensures full legal policy and contract compliance. Reduction in contract leakage alone can save you an average of 13%.
Suppliers affect both your ability to efficiently respond to your market and the value you extend to your customers. By gathering, cleansing, consolidating and managing your supplier data in a single location, you can gain an understanding of who your suppliers are, manage risk and better predict spend.
Evolving your procurement function from transactional to strategic can have a major impact on your profits. Strategic procurement comes from gaining visibility into your spending patterns and then using that data to identify latent savings opportunities, as well as following best practices in sourcing products and managing contracts and suppliers. Find out how Enrich, a Data Intensity Company, can help you make the most of your Oracle Procurement applications to start identifying significant savings today. Learn more here.
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